From Interest.co.nz comes news today that New Zealand is pushing ahead with a plan to develop macroprudential policy tools by the middle of the year:
Finance Minister Bill English says he expects to sign a deal with Reserve Bank Governor Graeme Wheeler by the middle of the year on the central bank’s so-called macro-prudential tools, but warns they won’t be a silver bullet to cool a hot housing market.
“The Reserve Bank and Treasury will finalise arrangements and I expect to sign off a memorandum of understanding with Reserve Bank Governor Graeme Wheeler by the middle of this year,” English said in a speech yesterday.
“There are some expectations that these tools will be used immediately to dampen the Auckland housing market. Those decisions will be in the hands of the Reserve Bank. The greatest influence on the housing market will remain interest rates and supply constraints created by the planning system.”
“Later this year, the Government will have more to say about how the financial stability tools will work alongside policies on more flexible supply in the housing market and social housing reform,” English said.
Among the tools under consideration include:
- Requiring banks to hold an additional capital buffer on their balance sheets during economic upswings;
- Requiring banks to hold additional capital against certain types of lending (e.g. mortgage lending);
- Adjusting funding ratios to require greater use of stable funding sources (e.g. term deposits instead of offshore funding); and
- Restricting high loan-to-value ratio (LVR) mortgage lending.
Mr English also insisted that decisions about macroprudential tools should be made by an independent Reserve Bank of New Zealand (the prudential regulator) rather than politicians.
The Real Estate Institute of New Zealand (REINZ) looks to have already commenced a scare campaign against the proposals, today warning that first home buyers would be pushed out of the market if banks are forced to require bigger deposits:
Real Estate Institute CEO Helen O’Sullivan is wondering how those loan-to-value ratio proposals will be implemented.
She says there’d be concern if all types of buyers are treated the same.
Helen O’Sullivan says it would be wrong to apply the same approach to a first home buyer as to someone who’d been in the market a long time.